Threat of automatic cuts costly to federal agencies

The drastic $85 billion in automatic spending cuts Congress approved in hopes of heading off another deficit showdown may or may not occur, but federal agencies say the threat has been disrupting government for months as officials take costly and inefficient steps to prepare.

A National Weather Service official is planning to shut down radars on sunny days in the South — and crossing his fingers that no unexpected storms pass through. New federal grants for medical research are being postponed, resulting in layoffs now and costly paperwork later. And military leaders, who are delaying training for active and reserve forces, are trying to negotiate millions of dollars in penalties that the Defense Department is incurring from canceled contracts.

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This is what happens when the federal government prepares for something Congress never intended to become a reality. If Democrats and Republicans cannot end their deficit standoff by March 1, the cuts will kick in across the country. Sequestration, as the law is known, has sent agencies scrambling to buffer themselves, spending time and money that ultimately may be for naught.

Even if cuts take effect, it might not be for long — making the hiring freezes, canceled training, deferred projects, and lengthy planning for furloughs and other contingencies an exercise in inefficiency.

“There will be impacts for every decision we make,” Air Force spokeswoman Ann Stefanek said. The service is deferring maintenance to conserve money “so we can train a pilot to go to Afghanistan” if cuts of up to 10 percent go through.

“Eventually we will have to fix that roof, but at that point it won’t be maintenance.”

As any family living paycheck to paycheck can attest, managing uncertainty can be a drain on energy and the pocketbook, not to mention the spirit.
Such is the case for government managers and their staffs, whose problems are compounded by constrained spending under a temporary federal budget that lapses on March 27. Many expect another stopgap plan, and another, before the fiscal year ends Sept. 30.

And while the price tag of all this is — well, uncertain — the 2011 fight over the debt limit cost taxpayers more than $1.3 billion in additional borrowing costs, government auditors found. On top of that, Treasury Department employees responsible for avoiding default logged more than 400 hours of overtime and comp time.

That battle followed a budget showdown on Capitol Hill that brought the government within a day of shutting down, a scenario that some House Republican leaders say they don’t rule out supporting this year. The near-event took its own toll.

“Across the system millions of dollars were spent in shutdown procedures and gearing-back-up procedures,” said Joan Anzelmo, a park superintendent from Colorado who retired four months later.

This time around, a frustrated senior executive at the Department of Homeland Security said he and his staff have spent countless hours remaking budgets for every contingency.

“First we were told not to develop plans” for sequestration, said the official, who spoke on the condition of anonymity in order to speak frankly. “Then we spent seven days a week coming up with them and [the cuts] got postponed. Now we’re doing it all over with new targets. It’s taking away from what we need to get done.”

Office of Management and Budget spokesman Steven Posner declined to comment on the planning costs. But Jeffrey Zients, the OMB’s acting budget director, warned lawmakers last summer that any planning “would necessarily divert scarce resources” from other important missions and priorities, “to say nothing of the disruptive effects this exercise would have” on federal workers and contractors. Any preparations “could inadvertently trigger some of the negative effects of sequestration even if sequestration never happens,” he said.

The sequestration law, passed in 2011 after that debt-limit fight, was to take effect Jan. 2. It was delayed two months after lawmakers and the White House agreed to raise taxes. The law calls for budget cuts of 8 percent to 10 percent, divided equally between military and domestic spending, saving $1.2 trillion over the next decade

The law’s fate grew murkier last week after House Republicans voted to suspend the country’s borrowing limit for three months, a proposal the White House and Senate Democrats have signaled they would accept.

In public, neither party is enthusiastic about sequestration, and some rank-and-file lawmakers say they will work to replace the cuts with other savings that would be less damaging to the military and other government services.

But time is running out for the two sides to agree on an alternative savings plan. Leaders in both parties said last week they believe the sequester will take effect — at least for a few weeks — while lawmakers wrestle with the expiration of the stopgap budget.

House Budget Committee Chairman Paul Ryan (R-Wis.) said Sunday that he thinks the cuts are inevitable because Democrats oppose Republican proposals to replace them with alternatives, including reduced spending on financial reform, the health-care law and other programs.

“We think these sequesters will happen because the Democrats have opposed our efforts to replace those cuts with others and they’ve offered no alternatives,” Ryan said on NBC’s “Meet the Press.”

Sen. Richard J. Durbin (Ill.), the chamber’s No. 2 Democrat, put the blame on Republicans. “Most of the Republican senators I’ve spoken to said: ‘We’re for spending cuts. We want sequestration to go forward,’ ” Durbin said last week. “So if there’s that sentiment . . . and with the House Republicans, I think we are committed to some form of sequestration spending cut.”

Agencies may be frustrated with all the back-and-forth, but companies and researchers in line for government funding are fuming.

“All they can say when I check with them is, ‘You’re still being considered for funding, but we can’t move forward at this time,’ ” said Stephen Higgins, a professor of psychiatry and psychology at the University of Vermont awaiting about $19 million in two grants from the National Institutes of Health to study chronic disease and smoking. “When [Congress] punted on sequestration, I knew I just took it on the chin.”

Higgins said he’s all but closed one clinic that had ramped up to 10 staff for a third five-year phase of a study of poor women who smoke during pregnancy. Among the losses was a nurse with 12 years on the project.

“The last thing they want to do is go forward on a project and find out they don’t have a budget to support it under the sequester,” Higgins said. “I’m losing highly skilled and trained employees for no good reason.”

Boston University researchers have lost 10 percent of their $230 million in annual grant funding and are seeing similar delays. “Someone has to be let go and then rehired,” Provost Jean Morrison said, calling the disruption “a wasted effort and a lot of bureaucracy” for critical research on diseases from cystic fibrosis to AIDS.

NIH officials declined to comment.

Defense companies were already preparing for a shrinking military budget, a slowdown reflected in a $2 billion loss reported last week by contracting giant General Dynamics. But the sequester threat has created its own uncertainty, as the Pentagon slows and cancels orders while warning that the automatic cuts would damage military readiness.

Pittsburgh-based RTI International Metals, which sells titanium to the defense industry, halved the footprint on a new plant in Martinsville, Va., because the government slowed orders on several contracts in late 2012, including the F-35 Joint Strike Fighter. RTI was scheduled to supply 4 million pounds of titanium to Lockheed Martin but instead was asked for 2 million.

“We kept production back because of the uncertainty,” said Dawne Hickton, RTI’s chief executive. “Further down the line, when the government needs to ramp back up again, it’s going to cost more.”

Some federal projects meant to improve public services have been stopped outright, and others have been abruptly delayed. The concern is that investing money now might be risky if it’s not there in two months.

Thousands of backlogged cases at the Social Security office in Rochester, N.Y., will remain that way after a long-awaited plan to double the number of judges handling hearings and appeals was put on hold.

“They came right out and told us, ‘We’d love to do it, but we don’t know if we’re going to have the money,’ ” employee Timothy Flavin recalled of the September decision.

The federal courts withheld the last $1.6 million from a project that’s modernizing an aging accounting system, pushing it back until June. The result will be “added costs to the project and lost opportunities and savings in future years,” spokesman David Sellers said.

The Air Force Reserve has pushed some of its annual two-week readiness drills to spring at the soonest, a move that threatens deployments.

“If you don’t train, your skills start degrading,” said Ron Hill, a reservist based in New Orleans. “When they say we need to deploy, we won’t be in a high state of readiness.”

And Bill Proenza, director of the Weather Service’s Southern region, decided to propose limited use of weather radar after his second-quarter budget dropped by a million dollars from the previous year. A hiring freeze left him with 66 vacancies on his staff of 900. Limiting the power-gobbling radars would save $100,000 as he braces for a sequestration that may happen, may happen for a short period or may not happen at all.

Said Proenza: “It’s penny-wise and pound-foolish to try and save a few dollars if you’re going to degrade our capacity to deliver our mission.”

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